Fracking Leading to Economic Growth, Rapid Job Creation in North Dakota

Published December 16, 2014

While much of the rest of the nation is still struggling to recover from the 2007-2008 recession, the fracking boom in North Dakota has been a job-creating machine. The state is now the nation’s second-leading oil producer, behind Texas, and it has the nation’s lowest unemployment rate—2.8 percent in October—with more job openings than applications.

The glut of jobs has caused the state to run ad campaigns to entice workers and families to relocate there, and there is already a housing shortage in some cities and towns, resulting in skyrocketing housing costs.

The fracking revolution has created a modern-day gold rush in North Dakota; oil field workers can make six-figure salaries, and even the fast-food restaurants pay hiring bonuses of $300 or more. North Dakota’s 2.8 percent jobless rate in October, according to the Bureau of Labor Statistics (BLS), is essentially full employment, meaning just about anyone who wants a job can get one. By comparison, Michigan’s unemployment rate is 7.1 percent, and the national average is 5.8 percent.

Oil and gas production has played a significant role in North Dakota’s economic growth, says Tessa Sandstrom, communications manager of the North Dakota Petroleum Council.

“Before fracking began in 2005, the state was among the bottom fifth of poorest states; now, per capita income is only behind Connecticut’s. Oil and gas drilling has had a huge ripple effect on employment, not just in oil extraction jobs but also increasing jobs in construction, retail, trucking, etc.,” Sandstrom said.

Companies ‘Desperate for Workers’

Commenting on North Dakota’s boom, Isaac Orr, a research fellow for energy and environment policy at The Heartland Institute, said, “In September, state officials from North Dakota said there were 26,000 jobs unfilled. Not every business has a ‘Help Wanted’ sign out, but many of them do. Companies are desperate for workers. Arby’s is offering benefits to work there. Walmart’s starting pay is $20 an hour for stockers.”

“What’s really interesting is lots of immigrants are going to North Dakota to find work. I had lunch with a roughneck who had worked in Washington, DC, and he told me North Dakota was the only place he’d been that reminded him of Washington, DC, because everyone there was from somewhere else,” said Orr, who visited Dickinson, North Dakota, in September to attend the North Dakota Petroleum Council’s annual meeting.

Orr added, “Housing costs are extremely high right now. In order to get a place not considered a dump, you’re looking at $2,000 a month. Needless to say, when a house comes up for rent, it sometimes gets snapped up in minutes.”

“North Dakota needs workers, and if you can swing a hammer, you can find a job, and that’s no understatement,” Orr said.

$600 Million Budget Surplus

The state now produces more than 1 million barrels of oil per day, compared to just under 200,000 barrels a day five years ago. Oil and gas extraction taxes account for 50 percent of all taxes collected by the state. That means the increased oil production has been a bonanza for the state government, which receives 11.5 cents for every $1 the oil industry makes and 11 cents of every $1 the gas industry earns. Increased oil and gas revenues have translated into a projected $600 million surplus for North Dakota’s current fiscal year.

In 2013 the State legislature established an allocation plan for the surplus revenues generated by oil and gas production within the state. Thirty percent of all oil and gas revenue is allocated to the state’s Legacy Fund (its rainy day fund). North Dakota expects to generate nearly $7.5 billion in oil and gas tax revenue during the 2013-2015 biennium and anticipates beginning to use these funds in 2017.

The state expects to spend some of the revenue on infrastructure development in oil and gas-producing cities and counties and on Indian tribes; on water-related projects; and on K-12 education. Funds were also set aside for land and energy conservation initiatives.

“None of this could have been possible without fracking,” Sandstrom said.

Momentous Shale Revolution

The economic and geopolitical implications of the shale revolution in North Dakota and other states are truly momentous, says Mark J. Perry, Ph.D., professor of finance and business economics at the School of Management, of the University of Michigan-Flint. He describes the shale revolution as the “energy equivalent of the Berlin wall coming down.”

“The shale revolution has moved the U.S. closer to energy self-sufficiency and independence, reduced our dependence on foreign sources of oil from unfriendly countries, and supercharged the U.S. economy with jobs, investment, revenues to landowners and local and state governments, and lower energy costs for consumers,” Perry said.

The shale revolution delivered an incredibly well-timed stimulus to the U.S. economy, he explained.

“At the exact time the U.S. economy was crippled in 2008 with the Great Recession, along came the shale revolution that started supporting the U.S. economy with jobs and investment capital. Without that stimulus, it’s certain the Great Recession would have been much worse and lasted much longer, and the economic and jobs picture today would be much bleaker,” Perry said.

“America’s energy industry remains one of the strongest sectors of the U.S. economy, and it provides one of the best reasons to be optimistic about America’s future,” Perry said.

Kenneth Artz ([email protected]) writes from Dallas, Texas.